Los Angeles nightclub, other businesses allegedly refused pandemic relief

On Saturday night at Club Cobra in North Hollywood, a drag queen dressed as Miley Cyrus lip-synced to “Zombie” by The Cranberries, with Halloween decorations and disco balls hanging from the ceiling. Muscular go-go dancers danced in a cloud of rainbow mist, and patrons vibrated to hits by Selena and Bad Bunny.

It wasn’t easy for the popular LGBTQ+ Latin nightclub to rebuild to this level of live entertainment after almost going out of business due to the Covid-19 pandemic.

The public health crisis shut down operations for 18 months and left owners hundreds of thousands of dollars in debt. Worse yet, the U.S. Small Business Administration has repeatedly denied Club Cobra’s application for financial assistance amid the COVID-19 pandemic, saying the facility offered services of a “lewd sexual nature.”

For Marty Sokół, 56, owner of Club Cobra, the lack of government assistance was frustrating and surprising.

“We are the good guys in this city,” Sokol said by phone. “We are the place where you can organize a birthday party. We are the place to take your tia. … It’s beyond offensive. (Tía is Spanish for aunt.)

Sokol is one of many business owners who say they have been wrongly denied funds under the federal government’s Indoor Facility Operators Grant Program. in 2021 ensure financial support of up to $10 million for arts and entertainment venues and promoters decimated by the pandemic.

Some have taken legal action against the SBA. And although courts have sided with business owners at various points, Sokol and others continue to fight for financial relief.

“We really feel aggrieved,” Sokol said. “If it weren’t for our community, we wouldn’t have a chance to survive.”

The problem is not limited to nightclubs. The Times also spoke to a North Carolina movie theater chain and a Tennessee concert promoter that are having trouble getting grants. Prominent cases – including a dispute between the SBA and the Harlem Globetrotters exhibition basketball team over a $10 million subsidy – have drawn attention to the problems. (The court dismissed the Globetrotters’ complaint against the SBA last October.)

The SBA also investigated awarding more than $200 million in SVOG to companies with wealthy and famous owners, such as Post Malone, Chris Brown and Lil Wayne, while withholding aid from others, according to a report prepared by the SBA. Business expert.

“The main complaint was the lack of transparency in the SBA’s decision-making process,” said James Sammataro, a partner at the Miami law firm Pryor Cashman who has represented entertainment companies in other SVOG cases.

“What (critics) basically said is that it’s too subjective. … It is applied unevenly, and the SBA – intentionally or otherwise – has created a hierarchy of who is more eligible to receive grants.”

The SBA declined to comment, saying it “does not comment on pending litigation.”

The controversy over SVOG is a reminder of the lingering consequences of Covid-19, years after the pandemic first wreaked havoc on the economy and the justice system. The global health crisis has interrupted entertainment businesses, as have the courts, Sammataro said, adding to the typical boredom.

“There is no expedition used in these types of cases, even though you are literally dealing with companies (whose) lives could be hanging in the balance,” Sammataro said.

Club Cobra has been serving drinks, DJ sets and live performances to the local LGBTQ+ community for over a decade. Its sister venue, Club Chico in Montebello, is celebrating its 25th anniversary.

During the COVID-19 shutdowns, Sokol and his team kept the business alive by streaming a socially distanced drag and go-go show on the OnlyFans subscription platform. The revenue wasn’t enough to get Club Cobra out of debt, so in April 2021, Sokol applied for a $486,762 grant.

When the SBA denied Club Cobra’s application, Sokol appealed.

After some persuasion, Sokol received an email from the SBA on November 3, 2021, explaining that Sokol’s application was denied “at least in part” because Club Cobra “presented live performances of a lewd sexual nature” or derived significant revenue “through the sale of products or services or presenting any performance or display of a lewd sexual nature.” In official materials regarding the SVOG program, the SBA lists lewdness as a basis for disqualification.

The SBA took issue with photos of Club Cobra dancers in “apparently sexual” poses and “revealing” outfits posted on the company’s social media platforms. He also condemned the virtual drag and go-go shows that Club Cobra streamed on OnlyFans, calling them “erotic dance shows.”

Sokol sued the agency, accusing the agency of arbitrarily and capriciously refusing to grant Club Cobra SVOG award money to similar establishments throughout Los Angeles, such as LGBTQ+ nightclub Reload Entertainment in Cahuenga and Los Globos in Silver Lake. The SBA argued that it conducted an informal review of the remaining facilities and determined that an additional “prudential review” was not necessary.

Sokol demanded that the U.S. District Court in D.C. force the SBA to reconsider his application. The court found that the SBA failed to provide a “reasoned analysis of why these apparently similarly situated competitors were treated differently.”

Sokol said it was painful that other nightclubs were receiving emergency aid while Club Cobra was denied money that could have been spent on renovations, missed rent payments and other liabilities.

“Watching them rebuild so easily, we didn’t feel sorry for them,” Sokol said. “We just wanted equal treatment.”

In December 2022, the SBA vetoed Sokol’s application again, this time providing analyzes of five “purported competitors” and the reasons they qualified for the grant. The SBA reasoned that for the most part, these facilities did not regularly publish suggestive images or present live performances of a lewd nature.

Sokol filed another motion for a default judgment in May 2024. The court has not yet responded.

Another company competing with SBA is Golden Ticket Cinemas, a North Carolina-based movie theater chain. .

Golden Ticket Cinemas CEO John Bloemeke opened his fifth and sixth locations amid the Covid-19 pandemic devastated the entertainment industry

Bloemeke was able to secure grants for most of its locations, but not for two located in DuBois, Pa., and Rapid City, S.D. After Bloemeke questioned the SBA’s decision to avoid these theaters, the government agency offered the business owner about $500,000 – down from the roughly $2.8 million he had asked for.

Bloemeke filed complaints accusing the SBA of underpricing Golden Ticket Cinemas tickets and then failing to disburse those funds.

The SBA responded that the Golden Ticket Cinema was not eligible to receive the full SVOG amount requested because the locations allegedly operated longer than Bloemeke reported.

The court agreed with the SBA’s position that it had no legal obligation to disburse the funds. However, he also found that the agency’s logic in awarding a much lower amount was flawed and ordered the SBA to re-evaluate the application.

According to Bloemeke, the SBA has not yet complied with the court’s ruling.

“It was very frustrating,” Bloemeke said. “I mean, we have nine complexes that only support five screens because we’re still trying to get a little bit above the water with some of these things.”

Meanwhile, in Nashville, Justin Roddick is still trying to secure a grant for his company, Concert Investor, which organizes concert tours for emerging musicians. Over the past 12 years, Concert Investor has helped launch the careers of Twenty One Pilots, Little Big Town, Kelsea Ballerini and other artists.

When bands stopped touring during the pandemic, Roddick’s business suffered.

“One year after Covid-19, we had no choice but to fully reopen,” Roddick said. “When I heard about the grant, I was very excited.”

Roddick soon became disillusioned. Its request for approximately $5 million was repeatedly denied, and the SBA found that Concert Investor did not control sufficient aspects of its productions to “meet the definition of an arts organization operator.”

. The Concert Investor team accused the SBA of wrongly changing the definition and moving the goalposts after the fact.

Initially, the court ruled in favor of the SBA. However, the appeals court overturned this ruling in May 2024.

According to Patrick Corcoran, a business representative, the SBA has set a December 11 deadline for issuing a new decision. Depending on the agency’s response, Roddick may have to wait until the next Ballerini or Twenty One Pilots come along and revitalize his touring business.

“It’s devastating to put money into the system and believe it works a certain way… and then no action is taken,” Roddick said. “It’s a bit unreal for me.”